Bitcoin is an online digital currency, just like the dollar or the pound, but with a few exceptions. Introduced by Satoshi Nakamoto in 2009, Bitcoin taps into a peer-to-peer payment system where there are no intermediaries and goods can be securely transferred between any two people on the planet. It is connected to a large network of computers and the unit of currency for the Bitcoin system (aptly called Bitcoin) can be easily obtained by joining the vast network. Bitcoin provides a fast, cheap and secure alternative for transactions, but few are willing to opt for it. So the million dollar question still exists, is Bitcoin a safe investment?
Bitcoin is only a few years old, an interesting creation that has amazed many and for the record, it has made a name for itself on the top financial lists. Its popularity has spread and led some of the leading companies such as Virgin Galactic to consider it as an acceptable source of payment. Bitcoin prices are rising at rates of up to 10% and continue to dominate as the market’s alpha, which has made many interested in investing in it.
Another special feature of Bitcoin is that it does not have a central bank, nor is it controlled by a central government. It is a global currency and its creation and existence lies behind a complex and geeky mathematical algorithm that allows it to track government-related mishaps. Cases of political instability and government absurdities that embarrass the economy and drive years of currency investment down the drain do not occur in the cryptocurrency system. This creates a safe and friendly investment opportunity with low inflation risk.
The Downside
Along with the always incredible advantage, cryptocurrency also has its disadvantages. As mentioned, this thing is still taking baby steps; and with that come great uncertainties. Bitcoin prices are volatile; it is currently rising rapidly and can fluctuate at 30% to 40% in a month. The world is still surprised by its appearance and there are very few Bitcoin and Bitcoin owners. This leads to unanswered questions and cold fear among people because investing in a new unpredictable ‘gold mine’ can have devastating consequences. Its newness brings a lack of regulation and scares away potential investors.
The enigma surrounding the Bitcoin system is a major factor to consider. Anything can happen and everyone participating in the Bitcoin market is on high alert. In December 2013, China eliminated the use of Bitcoin and this led to a drastic drop in its value from $1,240 to $576 in just three weeks. Developers are also determining the functionality of this global currency and many are questioning the thought of risking their finances for some group of nerds. This prevents many from buying into the system and increases the risk of investing in Bitcoin that much more.